Rising STAR

Privatizing health care for the poor might work--if the state will pay for it

When the state of Texas in July 1999 unveiled NorthSTAR, an experimental project in which two managed-care companies were hired to deliver health care to indigent mentally ill and chemically dependent people living in Dallas and six surrounding counties, its critics feared the worst: Because of a historical lack of state funding, the profit-driven companies would cut care and, as a result, a new wave of forsaken patients would wash up on the streets, in jails, or worse, at the morgue.

Despite 20 months of painful adjustments and bitter wrangling that continue to cloud the project's implementation, the worst hasn't happened. Although it is still too early to effectively evaluate the quality of care being delivered under the project, it has yielded one piece of promising news: NorthSTAR could work. The question now is, are state lawmakers committed to their philosophy enough to fork over the estimated $6 million a year NorthSTAR managers say they now need to make the program viable?

"We feel strongly that the legislators need to understand NorthSTAR is underfunded," says Carole Matyas, who manages the NorthSTAR program for Value Options, one of the two companies chosen as the plan's health-care providers.

Mark Graham

Carole Matyas says Value Options is not about to abandon NorthSTAR.

NorthSTAR, one of several managed Medicaid projects currently being tested throughout Texas, is a part of the state's trendy philosophy that privately owned companies, when allowed to compete for the state's health-care dollar, can more efficiently deliver health-care services than the county-run agencies and social-service organizations that have traditionally cared for the poor.

Not only could the companies, Value Options and Magellan, provide a new "continuum of care" by easing access into the system and giving patients, like employees in the private sector, the right to choose their doctors, it was promised, but also they could increase the number of people treated. To many, the plan sounded too grand to be true, particularly considering that Texas ranks seventh worst in the nation in terms of mental health-care spending.

As state lawmakers now begin the process of hammering out the state's two-year budget, Matyas and officials from the Texas Department of Mental Health and Mental Retardation, which regulates the project, are hoping to persuade the politicians that their project is succeeding and is worthy of additional funding--a difficult task in a year when no state departments are expected to get the level of funding they want. To make matters worse, Matyas is now having to fend off NorthSTAR critics, who point to several recent failures as evidence that the controversial experiment is on the verge of collapsing.

In June, for example, Magellan announced that it was bailing out of the project, thanks in part to medication costs that spiraled some 200 percent over budget and made it impossible for the Georgia-based company to realize profit. Although the state is searching for a new company to take Magellan's place, so far none has expressed interest.

Another blow came in January, when Value Options told the state it needed $10 million in emergency funds to offset losses it has incurred since the program's beginning. The request, Matyas says, is being wrongly interpreted as a threat that the company will follow Magellan's lead unless new money is made available for the project.

"There is rumor out there that Value Options is just waiting to give notice to the state to terminate its contract. That's not true," Matyas says. "We have no desire to terminate our contract with the state."

But Matyas' words aren't reassuring everyone. In the coming weeks, the Dallas Area NorthSTAR Authority or DANSA, a local committee created to provide oversight to the project on behalf of its patients, will hold a series of public meetings to discuss what the state should do in the event that Value Options abandons the project--a move that could effectively bring the experiment to an end given the absence of corporations willing to take Magellan's place, says Tom Turnage, DANSA's executive director.

"There are some who want to go back to the old way," says Turnage, who spends much of his time acting as a sounding board for complaints from NorthSTAR consumers and health-care providers. "DANSA's goal is to develop one or two proposals in the event that Value Options pulls out. Then we can present those to the state as 'these are what the community wants.'"

All that won't be necessary, says Matyas. In response to the company's emergency funding request, TDMHMR officials negotiated several changes with the company that are designed to recoup Value Options' losses without scaling back on care. Primarily, the company is limiting enrollment in the project by reducing the number of places where new patients can enroll and more closely screening patients' income level to ensure they are truly qualified for the program.

"We're just looking a little more closely at who gets enrolled," Matyas says. "We have had abuses in the system where people have been enrolled that don't qualify. We are not eliminating enrollment for qualified folks."

While the company has not cut the services it provides clients, Matyas says, it has been forced to cut the rates it has been paying some providers, most notably Dallas Metrocare Services, Inc., formerly known as the Dallas County's Mental Health and Mental Retardation department. As part of the cut, which tallied $1.5 million, DMS was forced to cut its medication management program, turning away some 4,000 patients. Those patients, Matyas says, are currently being absorbed by Value Options' other providers.